Soybeans Supply by Reuters

ANALYSIS-US Soybean supplies shrinking at alarming rate
-->2009-05-19 18:10:34 GMT (Reuters)

By Sam Nelson
CHICAGO, May 19 (Reuters) - A drought in South America, relentless buying of soybeans by China and steady demand from crushers is shrinking U.S. soybean supplies at an alarming rate and unless exports fade, prices could head even higher.
"I don't think some people realize this yet but the drought and China's demand have dramatically changed the dynamics," said Jerry Gidel, analyst for North America Risk Management Inc. "Soybean buyers need to get their needs covered over the next four to six weeks and not wait until August or September this year," Gidel said, of this year's harvest.
"When you figure in about a 650 million bushel loss for South American production and China keeps buying soybeans, you take down the supply pretty fast," said Doug Jackson, analyst for trade house FC Stone, Des Moines, Iowa.
Trade reports on Tuesday said widely followed Memphis-based analytical firm Informa Economics had estimated the U.S. soybean stocks at the current season on Aug. 31 at only 77 million bushels, the lowest in almost 40 years.
"Our thinking is more in line with USDA's 130 million. We think there will be some cancellations of old-crop and a shift to new-crop buying," said Gavin Maguire, analyst for EHedger
"Anything below 100 million bushels is pretty risky and that's more like $13 to $14 soybeans rather than $11 to $12,".
"USDA's current outlook is only a 16 day supply and the lowest in five-years, since 2003/04," said Joe Victor, analyst for Illinois-based research firm, Allendale Inc.
Victor said that a 77 million bushel carryout would be the lowest since 1972 or almost 40 years when the U.S. soy supply totaled only 60 million bushels. A carryout of roughly 75 million would last a week or less.
STOCKS TO USE RATIO AT RECORD LOW
Gidel said the ratio of soybean supplies to the demand for soy--the stocks to usage ratio--will fall to a record low 4.3 percent, assuming the USDA's 130 million bushel carryout is correct. "The previous record was 4.4 percent in 2003/04."
In the 1972-73 marketing year, when the U.S. soy ending stocks fell to only 60 million bushels the ratio was 4.7 percent, Gidel said. "There was a big difference in demand then. In '72-'73 demand was only 1.28 billion and this year it's projected at 3.050 billion," he said.
"We have the smallest carryout in modern history and it's an explosive situation (for the soybean market), if we have any kind of weather problem this year it will just explode," Jackson said.
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